The leading Total Bond Market ETFs are Vanguard’s BND and iShares’ AGG. There’s little room to optimize here as it really doesn’t matter which one you choose. When I run these ETFs in balanced portfolios using VTI/VEU and DGRO/DNL, I see a tiny performance improvement with AGG.
Here is a balanced model using 40% bonds, 45% DGRO and 15% DNL from July 2014 to May 2020. Portfolio 1 contains AGG while Portfolio 2 contains BND.
Likewise, here is 40% bonds, 45% VTI and 15% VEU from May 2007 to May 2020, with AGG in Portfolio 1 and BND in Portfolio 2:
In addition, AGG seems to enjoy a slight tax cost advantage to BND. See Part 5 of this series.
For these reasons, I have chose to use AGG over BND. For those who prefer mutual funds, FXNAX tracks the same index as AGG with slightly less fees and may perform a hair better over time. YMMV.
In Part 4, I will look at allocating among the three asset classes.